Germany’s Volkswagen AG is in talks to form a joint venture with Didi Chuxing to initially manage part of the Chinese ride-sharing company’s vehicle fleet and eventually to help develop vehicles specifically to meet the requirements of Didi customers.

Ride-sharing services, which are booked through a mobile app, are very popular in China’s largest cities, such as Beijing and Shanghai, where congested traffic and availability of parking are discouraging commuters from owning a car, although car ownership remains to be an aspiration for many and a status symbol in China. This trend could have serious implications for carmakers in the world’s largest vehicle market.

Initially, Volkswagen will manage a fleet of about 100,000 new vehicles for Didi, of which two-thirds will be Volkswagen Group cars. The agreement is expected to be signed early next month.

Volkswagen will also jointly buy some new cars with Didi to expand its fleet. The two eventually plan to collaborate to design and develop dedicated vehicles. The Volkswagen partnership is the first known project Didi is pursuing as part of a broad alliance it has recently formed with 31 automakers and parts suppliers.

Last week, Didi, together with 31 of its auto industry partners, announced the launch of the DiDi Auto Alliance, which will bring together resources and the strengths of the new mobility sector with those of key links in the automotive industry chain, with the aim of developing a full-capacity vehicle operator platform designed to embrace the upcoming transportation revolution.

“China could play a pivotal role in transforming the existing automotive and transportation structure that has been in place for over a hundred years. The Alliance is a gateway for our transportation industry to elevate itself from a global leader in scale, to a global leader in innovation,” said Cheng.

The ultimate goal is the production and use of autonomous cars, according to Reuters.

To support People’s Mobility in China, through 2022, Volkswagen Group and its joint-venture partners will make around EUR 15 billion (USD 18.15 billion) available for e-mobility, autonomous driving, digitalization and new mobility services. Under its Roadmap E strategy, the world’s most comprehensive electric vehicle offensive, Volkswagen will launch 40 NEVs (New Energy Vehicles) in China in the next seven to eight years.

Volkswagen, the world’s largest carmaker, sold almost 3.2 million vehicles in China in 2017, behind General Motors’ 4 million. China, where nearly 29 million vehicles were sold in 2017, is Volkswagen’s biggest market.

Recently, China announced that foreign automakers will no longer be required to establish joint ventures with local companies to manufacture vehicles in the country. The rule will be phased out within five years.

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